Summary

• The Government of Tanzania provided approval to Aminex for transferring a 50 per cent interest in the Ruvuma PSA to ARA
• After completing the farm-out within next few days, Aminex would give the operatorship to ARA
• The Ruvuma gas project was awaiting a go ahead from the Tanzanian government for a long time.

Aminex Plc (LON:AEX), an upstream oil and gas firm announced that Ndovu Resources Limited, its subsidiary, secured an approval from the Government of Tanzania for transferring a 50 per cent interest in the Ruvuma PSA to ARA Petroleum Tanzania Limited (APT). Having received the approval, Aminex expected that it would be able to complete the farm-out within coming few days. Post completion, the oil and gas company would give the operatorship to APT.

The shares prices of Aminex went up by almost to almost double in afternoon trade on 12 October after the company updated regarding the farm-out agreement (9 October: GBX 0.40, 12 October: 1.05). It is to be noted that the Ruvuma gas project was awaiting a go ahead from the Tanzanian government for a long time. 

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It is to be recalled that on 30 September 2020, Aminex informed that the parties involved in the Ruvuma farm-out deal agreed on extending the long stop date to satisfy the remaining conditions from 30 September 2020 to 15 October 2020.  Aminex hoped that the Government of Tanzania would provide its go ahead on the farm-out and transfer of operatorship would also be obtained by 15 October 2020. Aminex noted that this was the ninth extension to the long stop date. Additionally, APT said that the long stop date would not be extended again. In case, Aminex does not get the government’s approval by 15 October 2020, APT would terminate the farm-out deal.  

Over the last one-year period, Aminex had borrowed $3 million as advance and $2 million as loan from ARA Petroleum LLC. These borrowings of $5 million were required to be repaid as cash consideration to be paid on completion of the farm-out. The loan amount that was used to pay the capital gains tax on the farm-out is repayable to ARA Petroleum upon written demand. Aminex needs to repay the advance amount by 30 June next year.

In Addition, ARA Petroleum agreed for an additional funding agreement to advance up to $1.97 million to Aminex. This advance would facilitate Aminex to consider and follow substitute options for the company as well as its assets.  This advance would carry an interest at a rate of 13.77 per cent annually, besides being repayable upon written demand by ARA Petroleum.

Recent financial updates

During end-September 2020, Aminex released its unaudited half-yearly earnings report for the six months ended 30 June 2020. The company reported a loss of $1.15 million as compared to loss of $2.19 million for the consecutive period in 2019. The company substantially increased its investment in exploration and evaluation assets to $49.55 million from $48.97 million at 31 December 2019. There was a considerable decrease in running costs with almost 50 per cent savings on costs for like-for-like gross administrative expenditures. During the period, the company opted for significant cost cutting measures wherever possible, including acceptance of voluntary decrease in salaries by its key employees and directors.

Aminex said that the 50 per cent reduction in expenditure helped the company to withstand the economic crises caused by the coronavirus pandemic that led to a sharp decline in oil prices.  The company further added that due to the delays in the completion of the farm-out and the uncertainty in regards to the coronavirus pandemic, it has been continuing with additional initiatives for further cost reduction.

Stock performance

Aminex is an upstream oil and gas company which was incorporated in Ireland and focuses on development, exploration, and production. Its regional gas strategy is underlined by a tremendous growth in demand for gas as well as fixed pricing system. The company believes that continuous enhancements in the fields of environment, community, and safety are essential for ongoing success and sustainability.

The company stock (LON:AEX) was steadily going down since 8 June (GBX 1.0) on the LSE. But it more than doubled on 12 October after the announcement of Tanzania’s approval came in.

On 13 October 2020, at 14.05 PM, the company’s stock was trading at £1.00 down 4.76 per cent from its previous day’s close of £1.05. The 52 week low high range was recorded as 0.40 and 1.59. With a market capitalisation (Mcap) of £39.59 million, the stock provided a positive return on price, which was plus 7.69 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 76,955,824.